ELECTRONIC BANKING ON THE RISE

TARIQ AHMED SAEEDI
(feedback@pgeconomist.com)
Nov 22 - 28, 20
10

Electronic banking is getting popular in Pakistan as banks are building infrastructure to expand outreach of financial intermediary services to the masses across the country.

Almost all banks in the country are engaged in e-banking transactions directly or indirectly while customers are also taking keen interest in branchless banking due to its provision of services out of time and geographical constraints.

In rural areas and remote locations where branch operations cannot be opened for various reasons, banking and other financial services are accessible because of rapidly pervasive telecommunication services. However, electronic banking is also becoming a first choice in the urban settlements, where banks have relatively better telecom-infrastructure supports. One reason cannot outweigh others since its importance is variable from one place to other. In some places, for example, e-banking is preferred over traditional banking because of rising instances of robbery and snatching, when it is a matter of cash-withdrawal. Saving time and reducing cost are also other key reasons.

The data complied by State bank of Pakistan puts weight to the claims of growing online banking. It said numbers of transactions through internet, mobile, and call centres increased to four million during fiscal 2009/10 as compared to three million a year ago depicting a 33 percent growth while amounts involved in these transactions rose to Rs150 billion, up staggeringly 94 percent compared to Rs77 billion in the comparable period.

E-banking has rid routine and frequent banking transactions of tedious time-wastages and other hassles, though there is still room for upgrading such services pertaining to online submission of utility bills. After the inception of online banking, the painful wait-in-the-line for a menial job like utility bill's payment is redressed. Nevertheless, this service is not accessible to a large number of customers of banks, who still wait in the line to make payments. Online bill payment services for users of electricity, gas, and other utilities can be widespread when links between utilities-providers and financial institutions would be strengthened. Bill-payment kiosk is yet to be recognised by the customers. SSGC is perhaps the only utility, which sets in kiosk to receive payments. But, its area of operation is narrowly limited to few places.

Advent of e-banking has provided customers with substitute to physical interaction with service providers as now they can avail cash withdrawal and deposit facilities from coordinated kiosks of banks.

Notably, numbers of auto teller machines reached 4,465 at the end of fiscal 2009/10 as compared to 3,999 a year ago. Banks and telecom service providers are also collaborating to provide micro finance as well as money transfer facilities to the customers. Money transfer service is in popular use in far-flung locations where banking operations are yet to start physically. Telenor's easypaisa and Mobilink's mobile money order are some of joint initiatives by banks and telecommunication service operators to encompass un-served and underserved bankable population. Easypaisa is one of unique e-financial services introduced in the country and therefore widely appreciated by people. Microfinance that has loathsome share in total banking assets in Pakistan despite its widely recognised ability to alleviate poverty, can shower its blessings along underserved population if mobile banking services are to buttress microfinance initiative.

Financial institutions keep them at distance from micro financing because of its low-profitability while telecom operators launch joint struggles only with big financial institutions that are specialised more in managing net worth portfolios than in dealing with small lots. Financial experts say the collaboration between telecom company and community based micro-financier will be effective in expanding financial assistances to the needy in piecemeal.

Internet banking and other contemporary means of electronic banking such as call centre and mobile banking are witnessing widespread popularity with the information and communication technology spreading across the country. Quarter on quarter growth also showed a robust progress particularly in the banking via these channels. Numbers of e-banking transactions through these channels were recorded at 889 in Q4FY09, 906 in 1QFY10, 1,007 in Q2FY10, 1,232 in Q3FY10, and 1,192 in Q4FY10; total amounts involved in these transactions were Rs24 billion, Rs30 billion, Rs40 billion, Rs42 billion, and Rs38 billion respectively.

Electronic banking infrastructure in Pakistan has assumed further strength to serve growing bankable population and make banking services more user-friendly and penetrable. Real time online branches were 6,671 by end of last fiscal year as against 6,040 until June 2009. Similarly, points of sale stood at 52,049 in contrast to 49,715. Transactions through debit cards saw a significant jump from 6,395 to 8,140, however, credit cards transactions underwent a constant cut down throughout fiscal 2009/10. Credit cards transactions were 1,664 times with amount involving Rs35 billion in April-June 2009; 1,645 with Rs33 billion in the following quarter; 1,632 with Rs31 billion in Oct-Dec; 1,606 with Rs29 billion in Jan-Mar 2010; and 1,613 with Rs28 billion till end of fiscal year.

Overall, electronic banking, ATM, and RTOB transactions grew quarter on quarter through out fiscal year 2010. For example, e-banking transactions were recorded at 46.3 million in the first three month, 46.4 million in the following quarter, 50 million third quarter, and 53 million in last one. With a similar upward trend, ATM transactions rose to 31 million from 25 million in the corresponding quarter a year ago.

A huge bankable market in Pakistan is untapped with financial inclusion covering limited numbers of depositors and borrowers. Electronic banking can enhance the coverage area of banking services and increase economic activities by decreasing downtimes.